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Changing business models keeping vendors up at night

A highlight of the second day at the CompTIA ChannelCon event was a panel discussion of vendors on changes in the industry, and how to best adapt to them.

From Left to Right: Dennis, Vitagliano, Brunwin and Leonard

HOLLYWOOD FLA – As part of its Vendor Summit track at its ChannelCon event here, trade association CompTIA hosted a panel session on the challenges facing IT vendors today. While several issues were raised, most revolved around the theme of the rapid change in the industry, its impact on business models of channel partners, and how to assess both effectiveness of strategies and impact on brand.

“Business models are changing out there really quickly at the solution provider level,” said Frank Vitagliano, VP of North American channels at Dell, and one of two representatives of large, traditional IT vendors on the panel. “For those of us who have designed traditional programs, that’s changing things. We have to figure out how to remain relevant with this new model that’s out there.” He noted that the upcoming integration with EMC and its federated companies will provide – force might be a better term – Dell with an opportunity to restructure its operations to accommodate these changes.

“The market is moving so incredibly fast and is now incredibly complex,” said Brenda Dennis, Head of Americas and Global Enterprise Sales Operations at Cisco, the other large vendor on the panel. “Customers want to consume things in a new way, and it’s all about the new model.”

Dennis said that from a partner perspective, Cisco faces a major challenge to keep its partner program relevant in supporting both its traditional partner base, and new partners who are emerging with all these changes.

“We have a solid program, but it needs to evolve so we can embrace a multitude of partners,” she said. “That’s probably our biggest challenge, keeping our old partners profitable while we bring on new non-traditional ones.”

“The second piece, which is more challenging from a vendor standpoint, is what’s happening as models evolve at the solution provider level,” Vitagliano added. “There is a concern among vendors that the solution provider model has to change. The question is whether they can do that quickly enough while still driving their business.”

‎Carolyn April, Senior Director, Industry Analysis at CompTIA, who moderated the panel, noted this dilemma was a foremost concern for CompTIA.

“We see that in our research,” she said. “Partners have to evolve, but they also still have to keep the lights on. It’s very difficult to move into a new business model.”

Veronica Brunwin, Chief Product Officer at Relayware, which makes PRM (Partner Relationship Management) software designed to increase vendor engagement and profitability with their channels, had a different perspective on the issue, but saw the same trends.

“I’m seeing vendors who are completely throwing away their current product set for cloud, and completely reworking their channel as a result,” she said.

Evan Leonard, the fourth member of the panel, is both a long-time MSP, running the CHIPS Technology Group in New York, and a startup vendor with CrushBank, which leverages IBM Watson technology to provide SaaS-based help desk engineering services.

“We help partners understand the benchmarks, where they need to innovate to survive,” he said. “Part of what we do is education, and part is benchmarking.”

Dealing with the rise in importance of influencers in these new models is a constant challenge.

“The influencer model has been around for some time and isn’t new, but it is more relevant today,” Vitagliano said. “The challenge in the vendor world is a way to balance the programs to stay relevant. Influencers don’t care about traditional back end rebates. This is an interesting challenge which will evolve more over time.”

Cisco’s Dennis said that this process has led to Cisco having to embrace these types of non-traditional partners, as diverse as ISVs, consultants and accountants.

“We look at almost any company out there as an opportunity,” she said. “Software and services attach is really important for us.” The key challenge is setting up metrics and programs in their channel model to accurately track and measure success for these groups, in a program originally set up for large resellers.

“We work with both big companies and new brands,” said Relayware’s Brunwin. “Traditional partner models have to look at each group of partners very clearly, and so you have programs now with no rebates, but with much more collaboration and education.”

The impact of these changes on vendor brand has been substantial – but is also variable.

“Brand discussion depends a lot on the customer set,” Vitagliano said. “At the high end, and where you have direct sales teams selling, the brand still matters. However, when you get down into the marketplace where solution providers work, they effectively become the customers’ outsourced IT department. Brand doesn’t matter as much, and I don’t see that changing.”

Vitagliano noted that another key factor here is that solution providers typically get 75 to 80 per cent of their business from repeat competitors.

“If that’s the model, there’s no debate,” he said. “The solution providers are the brand, and that won’t change, especially as technology gets more complicated, Smaller businesses will rely even more on their trusted advisor. That’s why every solution provider has 2-3 primary vendors that they work with in each category. Many vendors have figured that out and they realize they are selling to the solution provider, not the end user.”

Leonard, speaking with his MSP hat on, agreed.

“The most important brand is ours,” he said. “It’s not the ingredients that matter, but the outcome – what our customers get from us and what they should expect. I’ve never had someone ask me if we have NetApp or Dell servers in our data centre. It’s about what services we provide.”

Leonard said that from his perspective, it’s not the brand that matters as much as the person behind it.

“I sell Cisco and I sell Dell,” he said. “Those are my leads. If I have an issue, can I reach out to the person behind the product? That’s more important to us – but not to our end users.”

The panel had different views on how best to measure partner success. Cisco has the approach of measuring everything to glean valuable metrics. Dell’s Vitagliano, on the other hand, thinks that kind of measurement is basically redundant.

“I have resisted over the years doing surveys to customers asking how solution providers do,” he said. “I think it’s a waste of money. I believe that customer relationship is more important to the partner than it is to me, so I trust that they are working on it. I’m concerned about training and enablement. If I’m not doing those things right, I’ll know it, and I won’t need a survey. I’ll have a large customer who is really upset with a not-capable solution provider.”

“Partner enablement – providing all the tools for partners to get them up to speed quickly – is absolutely critical,” Brunwin said. However she also noted that in terms of customer experience and measuring, part of their solution is supporting business planning, and most programs she has encountered don’t include customer experience in their metrics.

Dennis said that Cisco is a big believer in getting involved in looking at customer experience.

“Vendors can’t rely solely on the partner community to delight customers,” she said. “We do a lot of social media trolling – looking at what are people saying on media like Twitter and Facebook.”

“It’s all about engagement,” Leonard said. “People aren’t shy about sharing when they are having success or not. If you are really engaged, you know how well you are doing.”

Finally, Vitagliano noted that partner silence should not always be confused with support.

“When they stop complaining, that’s not good,” he said. “It often means they have moved on. There are a lot of choices out there.”